Value Based Healthcare Delivery

I recently came across this talk by Michael Porter about healthcare that he had delivered at Harvard  Business  School though the  talk was  generally about the healthcare system in the US  however  i felt that  it was quite  relevant  to healthcare  systems in general across the globe.

One  of the  most  important things that he talked about was  Value Creation and  improving the  Value delivery system. But then the question which arises is what is the  true value.  How do we  define Value becomes  critical , is it just patient outcomes , is it cost of delivery , could it be a  generalised figure and  he defines  it quite comprehensively  he says that it the patient health outcomes achieved  relative to the money spent to achieve those outcomes.  Which becomes a  simplified outcomes as numerator and cost as denominator.

This is  quite  a shift  in our existing way of  measuring success  which are either  based around profit maximisation, or Volume  delivered, or  access to healthcare in general. Quality as  it stands currently is  based entirely around the  process definition and  improvement. Be it any guideline we  follow NABH or JCI its  mostly process based. Process improvement  is very important  however outcomes  are  even more important.  And  are we really measuring the  clinical outcomes. If the  system is to improve  then the competition has to move from being profit or  process based to becoming outcome based and then to value creation and thats the  only way we can get a  handle on the spiralling costs of healthcare delivery.

So how do we really shift the  focus to value.

Lets Look at Outcomes outcomes need to defined per  patient and  his / her medical condition. We need to look at survival,  functional status, independence, residual defect / illness. Yes it is an intensive  exercise  but the  results would truly be  enlightening and  a true move towards the  goal  of quality. Define the  Outcome parameters for any surgery / medical treatment that is meted out including survival rates, extension of survival period, dependence of medication etc etc.

Secondly identify your costs. For some strange reason healthcare seems to shy away from a  practice which is so commonly followed in the manufacturing  sector and this is ABC (Activity based Costing ) .For Healthcare i would suggest a  time related Activity based  costing. Whats even more  specific is that it will  be a  patient based time related activity based costing.  We tend to see ourselves as distinct departments and subunits and we tend to do our costings similarly too(that  is if we do our costings). However a  true costing exercise must capture the entire cost related to the  patients  journey through  care  pathways. And through this way we should be able to define  the true value of a  patient outcome. The focus needs to be on the  Outcome , and  existing technology in terms of HIS  systems must integrate these costing parameters  but  the  end result could truly be transformational .

I personally look  forward to a  day where  we will focus on the right performance indicators though that  is a  different post in itself. But  i think this could very well be a move  in the right direction be it for a private hospital, a charitable trust or a  public trust.  Efficiency , effectiveness  both would be  effectively measured and  documented and  true value would lead to better profits / access/ volumes so this is a  win win no matter  which way you take  it.

Here is the  Video if you are  interested , apologies for the poor sound quality.

Disclaimer: The views expressed in this  post are my own and  are  not meant to be derogatory  to any institution or organisation. These are just my thoughts and  these are open for further  discussion and  development. Please do comment and  share and  let’s get some universal cognition into this. Thank you for your patience and  tolerance.

Analysing the common Primary Healthcare Model

Have  you ever wondered why there  is such little  investment in primary healthcare setups by established  healthcare  players. Though there have  been models like the  Apollo Clinics, or the  Manipal Cure and care. But why the  limited expansion and why only such few players.

A population of over 1.2  billion surely deserves a  better  primary healthcare setup and  honestly though individual private clinics are sprouting up  day in and day out why is it then that corporate healthcare chains are finding it so difficult in  establishing their presence .

The very evident answer to that probably would be the  bottom line the  EBITDA margins.Let us  consider what  exactly are the  revenue streams in  a Primary healthcare setup and what are the approximate gross margins associated with them.

OPD consultation – The  base of the stream  is the  Opd consultation and other than a basic one time registration charge the Consultation fee can be split with the consultant  according to various models. Though from my limited  knowledge the most common model is the  70 – 30 split, though in other cases a base rental model can also be selected specially if the  clinic  is located  in a  prime location. But consider this, this is a prime revenue  stream , the stakes can’t be changed much unless we are looking at growing consultants. The reason for this is our direct competition with hospitals, tertiary care providers , and established consultants if they do choose to visit a  primary care setup would ideally do it atleast on similar terms as with most established  corporate  hospitals. And there are a few hospitals out there who are  not looking at gaining anything from the  opd consultation component. It’s a  tough market ,  thus unless  we devise a  new model maybe even profit  sharing model could be considered, which promises larger returns once the  clinic is established  its difficult to see how this particular component can change, honestly for me  the  profit sharing model would eliminate two major problems of  community clinics ,  the  consultant  attrition and the Cash flow drying up . Another  way around it could be to review the  entire  community clinic model in terms of clinical manpower selection (growing  consultants) and have a  strategy in place there  to increase share in revenue , but of course this would come with longer break-even times, and maybe higher  marketing expenditures.

The LAB  –  i think this probably is the  king maker in the  community healthcare centre. To make the clinic setup profitable in-house investigation facilities are important.  And probably the critical factor here is reaching a  certain critical mass to make on site  batches optimal.  The  Health checkup vertical  as well as the opd will feed this. In addition it’s also important to establish the centre as a  really good competitive  path lab, and  competition just increases manifold from there. Another  problem here  is  insecurity if you are  looking  at establishing you lab as a  critical revenue earner there  will always be the  insecurity with GPs about patient poaching and this needs to be dealt  with effectively.  The  gross margins here are  around the  60 to 80% mark i think  from what  i have heard. But  then it all depends  on volumes.  I think an important  strategic decision here is  how we enter the market. We ideally  should look at reaching a  critical  number  of  clinics in a  geography / city so that a  central lab can be established and we can get some economies of scale.

The Pharmacy  – this is another very important  factor for the  primary healthcare  setup , the  in-house pharmacy the margin  here would be around the  25-32% gross. When compared to hospitals and surgical consumables  this is less. Again the  strategy ideally would be to establish the brand independent of the  clinic, as a  stand alone pharmacy. Again the  model would gain from a  centralized purchase department, to gain from economies of scale. However external factors such  as the DPCO if they are to be implemented stringently would affect our margins further  here, both in terms of negotiation abilities as well as  margins .

The referral revenue – This is specially applicable to primary setups linked  with corporate hospitals where a  certain revenue inflow  occurs from patient  referral and conversion

It makes  me wonder why other  corporate giants don’t entre this arena. It seems to be profitable, and  im certain the capital expenditure associated is comparatively negligible. I mean it’s just the  Land / property cost associated and most diagnostic machineries now are  available on the consumables model thus decreasing the  basic cap ex required.  The associated operation expenditure  is similar to hospital opds in   terms  of proportioning costs on scales. But then consider this most marketing departments  from corporate hospitals are ready to support primary care setups, for star referral doctors.  They are  willing to provide  free consultations in lieu for conversions, then must primary care setups for hospitals be considered as separate cost units. Could they be an extension of marketing activities  outreach community setups . Just a  thought need to look at  the financials of this.

Another  solution to the  primary care setup would be the  PPP model and I think this has been discussed before. However  most  corporates would be a  little  apprehensive about the pricing with PPP models and the  SE stratum they would be targeting might differ. Though the  volumes would definitely increase and the associated costs will decrease as associated  land / rent costs will be removed. But then again wont the mid ranged primary care setup models like the  Aushadhi  / med plus mode in AP gain from such an association.

Well lets see what the future holds  for us here, but primary care definitely needs some good effective players the gap between demand and supply is enormous and  not just that  ,  I personally feel that honest ,  transparent primary care  setups  could gain loads from a highly knowledgeable  and aware  middle class population who  would love to be associated with quality primary care brand , where  there  is continuity of care and honest  and transparent referral pathways  for when  secondary and tertiary care is required.

Disclaimer:

The views expressed in this  post are my own and  are  not meant to be derogatory  to any institution or organisation. These are just my thoughts and  these are open for further  discussion and  development. Please do comment and  share and  lets get some universal cognition into this. Thank you for your patience and  tolerance.

Prelude-Quality for Hospitals

I will go one step back and want to evaluate whether our approach is correct to our quality journey. The most important step towards quality is to have a commitment from the top management and fixing the goal. This should be captured in the documents (policies, protocols & SOPs) in an appropriate manner. The preparation of the document should not be merely for fulfilling the accreditation criteria but should be followed sincerely. The main challenge is to change the mind-set of the hospital staff towards quality system and it’s the time consuming process which needs to be initiated from the first group of employees. Quality systems is not burden or to identify fault but to improvise and provide the best to the patients.

When we talk about manufacturing industries, the emphasis is on spending more time on planning so that the implementation would be with minimum defect. But in hospital setup we never follow this concept. All quality related activities get initiated after completing the hospital building and starting operations.

In today’s scenario the approach is very different. First a hospital starts operations and while working identify issues and these issues are addressed with temporary fix. Such fix gets routine, thus inspires the management to build a system. Remember such system which is inspired by temporary solutions will always fail. When it start impacting other areas and no way-out get identified, the management starts aggressively focusing on quality systems. This process of self-exploration leads to loss of valuable time and thus impacts the hospital services and financials. Admission & discharge process, OPD processes & infection control, Emergency response are such issue which are never a focus while building an infrastructure or even preparing and following SOPs.

The best approach is to incorporate Quality concept at the beginning of the project. We can’t dissociate it from business plan. By amalgamating efficient processes design and quality systems together, we can optimize cost and can build appropriate infrastructure for patients. This requires to be run from top and to be included in the vision.

Quality for Hospitals, are we there yet?

Quality in hospitals seems to be one of the  most talked about issues  of today. I can understand why it is so important with consumers being more  aware, with competition being as high as  it is  and  expected to increase  further  in the  future and  with legislation being the  way it is for hospitals. Process  improvement  , documentation and  SOP creation seem to be a bare essential for hospitals in the world of today . Honestly speaking i don’t quite know how the  past was in  an era before 2003 , however  the  impetus that  is laid on quality  ever since  that era  has  only  grown manyfold over the  years.

No ifs and buts about the importance of quality, However what bothers  me the  most is that quality seems to be the means  to an end for most administrators. Historically if we are to look at quality in hospitals , Initially it was the  selected few going in for JCI accreditation who sought the  ghost of quality, in the  lucrative  pursuit of medical tourism. Then there  were the  local champions seeking ISO and Crasyl  ratings, remember   those  times, when we had  representatives of accreditation firms shooting quality down our  gullets, and  of course the  most  recent  turn is NABH. This now  seems to be our  gold measure  for quality and  standardisation at least nationally .

But think about it if these are the reasons we seek quality then isn’t  the quality itself limited by these  reasons. What are  we  checking for  what  comes under the  purview  of quality is it just those 638 parameters  defined by NABH 2011 (which might be  revised to 736 unofficial sources)that an organisation is assessed against. Is that  all there is to quality then aren’t we  constraining quality in stray jackets of limited vision.

Quality when taken up  as  an end  in itself is more beneficial to an organisation. Yes i would be wrong in saying  go against the  norms  forget  NABH its not quality, because it is and  is very important . All I,m saying is that just don’t  limit yourself to these parameters. Quality is  about  consistency, its about clinical outcomes , is  about processes , but in the  end its about (includes but  is not limited to)Patient experience, Consultant  relation, Employee  experience, and  well about anything and anyone  that comes in contact with our organisation.

I think  a newer approach is required to quality  where quality supersedes everything and is  not subservient to accreditation. And that  is where  creativity, innovation, progress and  differentiation will come  in.  I think quality departments  need to evolve , they need to expand their visions and  grow. Quality parameters must be developed reassessed and  re-envisioned intrinsically. Newer methodology other  than the existing  reaccreditation inspections must  be  used to assess quality. Innovative cross industrial methods  like the  Mystery patient a  once  talked  about concept could be re looked at. Seeking VOC (Voice  of customer) to define these parameters could be  experimented with. Opening  channels of communication are  essential. Newer technologies  such  as  social media could  be experimented with not just  for Branding but also  to define quality. Its high time we as administrators redefined our quality rather  than just measuring it.

In the end Creating  freely communicating open organisations that seek quality  for the sake of quality is the  step forward  not just for your Organization but for the industry as a  whole. And yes  we might not quite be there  but surely it would be a move in that direction.

Disclaimer:

The views expressed in this  post are my own and  are  not meant to be derogatory  to any institution or organisation. These are just my thoughts and  these are open for further  discussion and  development. Please do comment and  share and  lets get some universal cognition into this. Thank you for your patience and  tolerance.